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High Frequency Traders : Taking Advantage of Speed

Ait-Sahalia, Yacine - 2013

We propose a model of dynamic trading where a strategic high frequency trader receives an imperfect signal about future order flows, and exploits his speed advantage to optimize his quoting policy. We determine the provision of liquidity, order cancellations, and impact on low frequency traders...

Persistent link: https://www.econbiz.de/10013074299

Dark Trading at the Midpoint : Pricing Rules, Order Flow, and High Frequency Liquidity Provision

Bartlett, Robert P. - 2015

Using over eight trillion observations of market data, we use a regression discontinuity design to analyze the effect of increasing the minimum price variation (MPV) for quoting equity securities in light of recent proposals to increase the MPV from $0.01 to $0.05. We show that a larger MPV...

Persistent link: https://www.econbiz.de/10013020713

Free Lunch! Arbitrage Opportunities in the Foreign Exchange Markets

Ito, Takatoshi - 2012

for foreign exchanges) data, it is found that risk-free arbitrage opportunities--free lunch--do occur in the foreign … pair and (b) triangular arbitrage relationship involving three currency pairs. The latter occur much more often than the … former. Such arbitrage opportunities tend to occur when the markets are active and volatile. Over the 12-year, tick …

Persistent link: https://www.econbiz.de/10013097780

Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets

Ito, Takatoshi; Yamada, Kenta; Takayasu, Misako; … - 2021

With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit … pairs—can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage … arbitrage opportunity and places orders for multiple transactions—two in negative spreads and three in triangular arbitrage …

Persistent link: https://www.econbiz.de/10013310382

Liquidity and the Threat of Fraudulent Assets

Li, Yiting - 2011

We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous...

Persistent link: https://www.econbiz.de/10013119606

Counterparty Risk Externality : Centralized Versus Over-the-Counter Markets

Acharya, Viral V. - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

Persistent link: https://www.econbiz.de/10013125914

The Market for OTC Derivatives

Atkeson, Andrew - 2013

We develop a model of equilibrium entry, trade, and price formation in over-the- counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders...

Persistent link: https://www.econbiz.de/10013084727

Monetary Exchange in Over-the-Counter Markets : A Theory of Speculative Bubbles, the Fed Model, and Self-Fulfilling Liquidity Crises

Lagos, Ricardo - 2015

. The theory predicts that asset prices carry a speculative premium that reflects the asset's marketability and depends on … anomalous. The theory also exhibits rational expectations equilibria with recurring belief driven events that resemble liquidity …

Persistent link: https://www.econbiz.de/10013015987

Crises and Liquidity in Over-the-Counter Markets

Lagos, Ricardo - 2010

-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and …

Persistent link: https://www.econbiz.de/10013150646

Credit Default Swaps and the Credit Crisis

Stulz, René M. - 2010

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...

Persistent link: https://www.econbiz.de/10013150831

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